An American portfolio manager wishes to increases her exposure to Japanese stocks by $10 million without taking much foreign exchange risk. The spot exchange rate is ¥100 per dollar. She considers several alternatives:
$\bullet$ Exchange Traded Funds (ETFs) are listed on the Tokyo stock exchange. The ETF is a traded fund that tracks the TOPIX index. Each share has a value of ¥1,000.
$\bullet$ Futures contracts are available on the TOPIX index. Each contract is for ¥1,000 times the index. The current futures price of the TOPIX index is 1,000. The margin deposit per contract is ¥50,000.
$\bullet$ At-the-money call options on the TOPIX index are available. Each contract is for ¥1,000 times the index. The premium on the call is ¥60 per index or ¥60,000 per contract.
What strategy could she adopt using those contracts?

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The Answer of An American portfolio manager wishes to increases her exposure to Japanese stocks by $10 million without taking much foreign exchange risk. The spot exchange rate is ¥100 per dollar. She considers several alternatives:
$\bullet$ Exchange Traded Funds (ETFs) are listed on the Tokyo stock exchange. The ETF is a traded fund that tracks the TOPIX index. Each share has a value of ¥1,000.
$\bullet$ Futures contracts are available on the TOPIX index. Each contract is for ¥1,000 times the index. The current futures price of the TOPIX index is 1,000. The margin deposit per contract is ¥50,000.
$\bullet$ At-the-money call options on the TOPIX index are available. Each contract is for ¥1,000 times the index. The premium on the call is ¥60 per index or ¥60,000 per contract.
What strategy could she adopt using those contracts?

An American Portfolio Manager Wishes to Increases Her Exposure to Japanese